Which four industries should we bring back onshore to secure Australian supply chains?

By Rob Stummer, Asia Pacific CEO at SYSPRO

Almost every Australian business that survived the pandemic learnt some valuable lessons, not just about resilience and flexibility, but also how to manage a major disruption to their supply chains. To ensure the future wellbeing of many Australian sectors, should another major interruption occur, radical new approaches are needed to onshore several key industries for strategically important goods that are essential for national resilience.

According to our recent study into business resiliency during COVID-19, 42 per cent of businesses stated that they will near-shore or re-shore manufacturing operations in the near future. This reconfiguration of supply chains will have a positive impact on the localised supply of materials and result in dual sourcing policies for improved supply certainty. So, which key industries should Australia consider reshoring to de-risk Australian supply chains in preparation for the next major disruption?

1. Steel

After decades of relying on steel produced overseas, recent events have driven Australian metal fabrication companies to seriously consider onshoring again. Why the change? It turns out that many manufacturers have learned a hard lesson regarding the negative side of offshoring over the last 30 years that does not occur when manufacturing remains onshore in Australia.

To transition back to onshoring, the Australian steel industry needs to not only offer the types of steel demanded by the key industries here, but it also needs to manage production costs, product quality and on-time delivery to be more competitive against offshore producers.

An Enterprise Resource Planning (ERP) system will help them by automating and integrating business processes and improving management information, giving fabricated metal manufacturers a 360-degree picture of what is happening within their businesses.

According to a report by the Australian Department of Industry, Innovation and Science, 90 per cent of domestic steel demand is from the manufacturing, construction and mining industries. There is certainly an appetite to reconsider our onshoring strategy for crude steel production and to reduce our over-reliance on imports, we need to support and invest in our national steel industry.

2. Pharmaceuticals

The COVID-19 pandemic has forced the Australian Government to recognise the dangers of offshoring our pharmaceutical manufacturing. As a nation we are now focused on relocating pharmaceutical manufacturing back inside our borders. This will reduce the risks associated with offshoring, such as supply shortages, disruptions in supply chains, work interruptions and importing problems.

As more Australian companies focus on manufacturing pharmaceuticals like vaccines and COVID-19 treatment drugs, the growth of onshoring brings its own challenges. Critically, pharmaceutical manufacturers must comply with strict Therapeutic Goods Administration (TGA) requirements. Their cleanrooms, isolated environments for manufacturing, must be free from pollutants or contaminants to ensure TGA compliance.

The TGA requires cleanrooms to be strictly controlled, including monitoring airborne particles, air pressure, airflow, temperature, humidity and lighting. Every cleanroom must have an accurate monitoring system. Cleanroom particle counters help measure the air quality, but their maintenance is labour-intensive and requires an average of two technicians per machine. If this process is digitised using an Internet of Things (IoT) solution, it removes the requirement for technicians to enter the cleanroom constantly to work on the machines, which lowers the risk of contamination. It also increases the accuracy of the standardised data collected from a variety of devices and this is captured by and reported through an ERP platform.

CSL in Melbourne is producing more than 50 million doses of the AstraZeneca vaccine at its factory in Broadmeadows, north of Melbourne, with its influenza vaccine business, Seqirus, completing the packaging process at another factory in Parkville. Two million doses are expected to be delivered by the end of March, with the company scheduled to produce one million doses a week from April onwards.

3. PPE

The Australian Government is strengthening our sovereign capability to manufacture the materials needed to make Personal Protective Equipment (PPE) here. The Australian Manufacturing Fund for PPE was established to stimulate business investment in new technologies and processes in the manufacturing sector.

Kestrel Manufacturing received $495,000 to assist in its production of filter materials used in both surgical and P2 masks. The company will dedicate one of its existing melt blown machines to producing high-quality medical grade filter material that will assist other local companies like Med-Con as it ramps up its annual mask production from a couple of million a year to almost 60 million.

Belgotex Fabrics, Queensland’s only major textile manufacturer, has diversified into tight weave fabrics needed to make frontline health workers’ medical scrubs uniforms and received investment from the state government.

Agile manufacturers have been able to switch gears quickly by changing products entirely. ERP systems make it easier for manufacturers to adopt this type of flexibility by providing scheduling strategies to handle unexpected orders or order changes through features such as capacity planning, work order management and materials requirements planning.

4. Recycling

For 30 years, China took in the world’s plastic. When they stopped, local councils and the recycling industry were faced with an unprecedented recycling crisis, especially in plastics. In December, the Australian Government passed legislation banning the export of unprocessed waste overseas via the Recycling and Waste Reduction Act 2020. There is now a significant opportunity for Australian manufacturers to utilise Australian sourced recycled materials and re-shore imported, non-recycled product into Australian sourced recycled products. This will strengthen the Australian recycling supply chain.

An ERP system will efficiently manage the complete value and supply chain for waste recycling, including waste collection, waste production and treatment, to recycling and repurposing.

Why reshore?

It has become clear in Australia as in other developed countries during the pandemic that way too much of what we deem essential has been made overseas. And even before COVID-19 the conditions were right for reshoring.

Industry 4.0 technologies, additive manufacturing, IoT and automation and artificial intelligence have combined with traditional ERP to erode the advantage once held by low-cost mass manufacturing operations in Asia. The challenge with longer supply chains, is that they often become inflexible when unexpected changes happen. With the global lockdowns occurring with little notice, the outsourcing of operations to another country is no longer viable.